I don't know when Peak California will come, but I'm fairly certain it will happen at some point, and this opinion article actually does a great job at summarizing my opinion as to why in its very last sentence:
"Californians will end up like the landed gentry in interwar England. Lovely houses, illustrious history, and no conceivable way to pay their bills."
Why do tech companies flock to California (LA/SF)? I often hear people credit the great technical universities. But that can't be, because most of the actual workers at these companies didn't go to Bay Area or even California universities [1]. If they're willing to move from their home to California for work, it's safe to assume they're willing to move from their home to almost anywhere else for work. It's not due to cheap housing or even available housing. It's not due to the great commute into work. It's not due to the low cost of living. The only argument I hear is that tech companies move to SF/LA because lots of tech workers are there, and lots of tech workers are there because lots of tech companies are there.
So if there's nothing holding technology to SF/LA, when does it become a competitive advantage to have your offices anywhere but California? At some point it will. And it will be long overdue.
It’s really quite simple; Silicon Valley is maybe the one place in which I have ever found nearly everyone I meet has a “pay it forward” attitude. It is infectious, and it means that as a “no name” startup founder, you have nearly infinite access to advice and capital, as long as you are convincing enough and tell a good story. There is no immediate expectation of return. I spent most of my life living in NYC, and I originally started Tinfoil in Boston (and went to school at MIT). Both cities are “startup hubs,” but the same attitude doesn’t exist. Boston was particularly bad about “what’s in it for me?” being the common theme of any conversation.
The upshot is that now I volunteer my time often, and for free, to help others who are just starting out. I cannot predict who will be the next Google, but I enjoy helping smart founders, and I enjoy giving back in the same way I was given to.
> Why do tech companies flock to California (LA/SF)?
1. California has laws surrounding non-compete, making it easier to poach from the Fairchild Semis, Hewlitt Packards, Intels, Sun Microsystems and Googles of the era.
2. It's easier to recruit out of Michigan than into it. California wisely keeps its snow in one place: Tahoe.
3. Diversity. As you point out, there's a ton of H1-B workers, and SF and LA have sizeable preexisting communities. It's just easier to be an immigrant or hyphenated-American in world class metro areas that can support a variety of ethnic and cultural clustering.
4. Public transit. Depressingly, the bay area still has better public transit than most other cities. Yes, the big companies still run coaches in the bay area, but that works in part because of density you won't see in cheaper, lower cost metros. And if you're recruiting internationally, the ability to commute to work without a drivers license or car kinda matters.
5. Access to money. There's a decent number of banks in SF's Financial district -- Wells Fargo and Charles Schwab are headquartered here. VISA is nearby in Foster City, and there's a number of VCs on Sand Hill Road you won't find in other cities.
It’s the network effects you mentioned. The reason to be here is because people are here.
While that doesn’t seem like something that _has_ to be in California, it is already here and that’s not something you can just move.
As for why other cities have a hard time competing, it’s the same thing. If CA is perceived as “where innovation happens” then people will look for jobs here. They won’t even look at e.g. Kansas City or Charlotte or wherever, even if there are open roles there.
It doesn’t have to be this way and probably won’t be in ten or twenty years. Especially after this wave of IPOs, SF will likely be unlivable for most. If companies can continue to raise enough money to pay equivalently higher salaries, then the boom can continue a while longer. Otherwise, the numbers don’t make sense.
It’s the Dalton, GA effect — why do carpet companies set up their manufacturing in Dalton? Because that’s where people make carpets. To put it another way, current industrial capabilities contain historical path dependencies that are hard to replicate artificially. In the case of SV (+ Bay Area), the nexus of speculative capital, incumbent tech firms, a startup ecosystem, and top-tier technologists is basically impossible to develop artificially. While the geography of the area may expand — I’m no local, so it’s beyond me why East Bay hasn’t seen significant expansion — it’s hard to imagine SV being displaced as the center of American tech prowess.
> If they're willing to move from their home to California for work, it's safe to assume they're willing to move from their home to almost anywhere else for work.
Not sure. I moved to the Bay Area from Germany, and while the primary factor was of course the job that was offered to me, the nice weather and the really quite stunning landscape were a factor. I'm still pretty happy if I'm on a hilly street in SF and see the bay, the Golden Gate Bridge, all that jazz. And SF itself is still quite a pretty city, despite its problems.
> If they're willing to move from their home to California for work, it's safe to assume they're willing to move from their home to almost anywhere else for work.
Not at all: for me personally, California was a bit of the final destination. It's the place where you have the best chance of being at the forefront of technology. And where you have the highest chance of finding your next job if the first one doesn't work out.
When I moved away from the East Coast to the Bay Area, it was already clear that it'd be hard finding another job in my field (chip design) if my current company would go under. That company has since gone under and over the past decade, a large part of our circle of friends there now lives here.
Talk about Silicon Alleys or Silicon this or that somewhere else is nothing new. I remember such articles in the nineties.
I do think things will slow down in general because of Moore's Law being close to the end. But that's going to be a problem for everyone, not just Silicon Valley.
This is a great opportunity to remind everyone that the less-known field of Economic Geography [0] exists.
If California's state government mismanages things so badly that the costs imposed by being in California exceed the network benefits things could change very quickly. Until such a day, it is likely that they will enjoy a significant advantage in producing tech stuff. Location benefits are far greater than the pundits realise, some things are nearly impossible in practice if you aren't located in a key hub for your industry.
People desperately want to escape CA but have no choice because that's where the jobs are. Jobs are there because companies are there. Companies are there because it's not their problem and they don't pay the full cost of their egregious location decisions. It all comes down to supply of jobs vs supply of homes: it's desperately out of balance.
Voters think they can actually stop growth by stopping housing development. It's not the housing that brings people to CA, it's the jobs, especially jobs for immigrants and jobs for people outside of CA (in the US).
California doesn't enforce non-competes so it's very easy to for employees to start a new business with little risk of being sued. Eg: you could work for Google self-driving car division, and leave and start a competing company. It happens all the time.
CA has some good laws, such as regarding non competes, parental leave, sick leave, environmental laws, legal marijuana, assisted suicide. Nice weather and landscapes also help.
>So if there's nothing holding technology to SF/LA
You just stated the reason why the tech companies are there. Feedback loops are a real thing that happens.
As a result of all the tech companies being there, the tech VCs are there, the recruitment agencies are there, etc, etc. That’s just how this works. To see the original factors you’d need to look at the history of the region, but beyond a certain point these things become self sustaining.
Sure there are forces in the other direction, and some individuals or companies might find them compelling, but specialisation works.
For me personally this is the best place I could find where the environment pushes me to be better always. It’s the difference between launching something and making $8k in a week and people around you saying “Why so little? What went wrong? How can I help?” instead of “That’s not possible you must be lying”
I for one find it easier to change my environment than to fight my environment.
> Why do tech companies flock to California (LA/SF)? I often hear people credit the great technical universities. But that can't be, because most of the actual workers at these companies didn't go to Bay Area or even California universities [1].
2 flaws here:
1. The majority of those h1b workers are at like tcs Wipro and Infosys, not conventional sv companies.
2. Being close to technical universities is good if it gives you a recruiting edge, even if only some of your employees come from that school.
The question of "clustering" is an old one in economics, and also politics and public discourse. PG addressed it a few times, for example. He also write about how to create new centers, fwiw.
It's not a straightforward question, and I don't think any answer is entirely satisfying. A couple of cents though.
1¢ - Industries like tech are a cultural phenomenon, like a music industry or art industry. You can't just decide that Warsaw will have Seattle's grunge rock scene. It just grew there as a cultural outgrowth. It can't be planted elsewhere with predictable results. The thoughts and little decisions made by people are influenced by their cultural context.
2¢ - For the best (in business terms) tech companies, currently, costs like salaries mean nothing.
Twitter and FB were Twitter and FB with 1% of their current visits and employees. The extremely profitable and businesses enabled them to hire tens of thousands of people and spend tens of billions per year. We're these people necessary to the ad part if the business that employs most of them?
I suspect that they aren't. IE, if it turned out FB could only make $40bn or $8bn pa (currently making $80bn) from their site, they would manage to produce the same fb with few compromises on a much reduced budget. This isn't BMW, where operating costs and economic output (the number of cars) are tightly related to eachother.
If google or FB want to increase profit margins, they can, easily, by a lot. They would if they needed to, but they don't. Capital markets like the idea that they are reinvesting for growth and capital markets don't have any better ideas for where to invest profits anyway.
With no incentive to cut costs, why move somewhere cheaper?
I don't think the almost anywhere assumption holds for several reasons - a bad cultural climate can be a sure turn off (anti-intellecutalism and open bigotry), a "good" one can be a pleasure, and employees prefer to have plenty of alternative employers.
There are multiple reasond - security from layoffs or bad workplaces, job-hopping is the defacto way to raise salary, and it also keeps them having to compete for them some.
A middle of nowhere job sets off "it's a trap" alarm bells consciously or unconsciously as an isolating move.
That said there is a lot of range between "most expensive areas in California" and "cheap one company towns".
I suspect sprawling out to network edges would maximize benefits for costs similar to Palo Alto once being the cheap option.
I have one answer for you, the opportunities and the salaries are the greatest. Since all the great teams are in the bay, if you want to join one, you are forced to move to the bay now. It's a cycle.
> I often hear people credit the great technical universities. But that can't be, because most of the actual workers at these companies didn't go to Bay Area or even California universities [1].
Having great technical universities doesn't mean most workers will come from there. Obviously a majority of employees do not come from these schools. But a plurality? I wouldn't be surprised.
How it came to be is related to a variety of factors.
But it has incumbency in some things and will be impossible to compete with in some ways.
Better for regions to develop competencies in which they have some kind of advantage. Alberta makes some kind of specialized natural resources extraction tech. Makes sense!
Network effects matter a lot in startup world. You learn a lot about your own business by talking to other co-founders and business leaders. The lead generation is easy and talent is easily available.
Indian and Chinese immigrants also play a big role. Stuck on backlog these are cheap employees who are desperate for employment because their H1b is tied to they having a job. These people will work for 60 hours a week for a salary of 20.
Just how much ink needs to be spilled about how California and Bay Area are doomed. I have probably read a hundred article over the last 15 years predicting the demise of both, but in reality the exact opposite happens as California and Bay Area economy continue to crush the rest. The gap between SF and rest of the country when it comes to venture investment has actually grown as the cost of living has gone up. For example, in 2018, $45bn was invested in Bay Area startups whole only $1.5bn was invested in Austin and even less in Denver, Utah etc. It is not even close. Weirdly, the other fast growing tech regions are similar to California - expensive, dense, and left leaning (NYC, Boston, Seattle).
Maybe this time the prediction will be true, but I am willing to take a large bet against it. And this is because several things, but the primary reason is that California continues to overindex it's policies towards people, while other competing states overindex on business friendliness. But in the knowledge economy, a thirivng talent market is far more relevant to a business than some tax breaks. If you can't execute and be profitable, what's the point of a tax break. California optimizes for people through various mechanisms - non competes, inclusivity, diversity, environment, labor protection, safety net etc. If a place is great for people, it is great for business.
I love seeing all the speculation here on HackerNews about why tech companies flock to California, and especially to the Bay Area. Everyone has their own theory: access to money, the great weather, non-competes not being enforceable, great universities, the “pay it forward” attitude, immigrant diversity and tolerance, "good" public transit (as compared to other parts of the US), network effect (because the best developers, investors, and tech companies are already there), beautiful landscapes and the ocean, concentration of VCs, etc.
It reminds me of a similarly long discussion here on HN about why Americans were generally thin in the 1950s but much fatter today. Again, everyone was pretty sure of their reason, the leading theories being: fast food, food being cheaper, rise of sedentary jobs, less physical activity due to more cars & labor saving devices, wives now working outside and not cooking at home, big reduction in smoking (because it keeps you thin), more sugar in foods, more carbs in our diet, etc.
All of the theories above sound reasonable. The problem is that there is almost no way to do controlled experiments to find the true answer. And the true answer could be quite complex, like it was initially 38% factor A, 22% factor B, and the C,D, & E making up the rest, but over time it's become 5% factor A, 11% factor B, with factor D now dominating at 58%.
I'm resigned to the conclusion that we're not going to know the answer. It's a complex interaction of millions of individual decisions and interrelated changes over a period of decades in a way that's not reproducible.
It is probably first mover effect. Bay Area had silicon valley. Remember silicon? Many things involving semiconductors and electronics grew up in the Bay Area because of Fairchild and the traitorous 8. In fact, you could make the argument that the first generation of electronics businesses involving vacuum tubes were in the area as well (in Oakland). Software companies growing there happened later when the semiconductor money needed something to invest in, and computers were something semiconductor people understood.
Nobody wonders at Wall Street being a center of finance after some 18th century traders met under a buttonwood tree, nobody wonders at Hollywood continuing to be a center of film and TV production, and nobody should wonder at Bay Area being a center of software development.
I'm skeptical of any model that throws up its hands and says "this is so for a number of reasons I guess". Multifactor trends are unlikely [1], bad at explanation and prediction, and easy to fit to anything. It's better to admit you don't know than say it's a combination of N things.
Remember, most things are hard to explain until you know the truth. That doesn't mean the truth is super complicated.
For all of the talk about California’s immense wealth, most people are unaware that the state also has a higher rate of people in poverty than any other state when you correct for local cost of living and taxes.
I'd love to see some numbers that take the origins of the homeless people into account. Did these people become homeless in California or did they become homeless elsewhere and then migrated to California? The mild weather and liberal attitude make CA a lot more attractive to the homeless than many other states.
With great wealth comes great inequality: for the most part, California condenses all the extreme parts of the U.S. economy into one state. Unless California invests more in its public utilities (or anything that allows for an even playing field), economic inequality in a high economic region should be expected.
California is the United States, writ large. It's not qualitatively different, it's just more so.
Or, from a slightly different standpoint, the rest of the country is California, just 20 years behind schedule.
I have lived in many different places all over the United States, including twice in California, where I have settled with my family, and it's very easy to fall into a "crazy california" narrative - especially when comparing with "sensible" places like Minnesota. But it's not true. Right this very moment in Minneapolis there is a heated, polarized debate about housing affordability and homeless services and zoning that is indistinguishable from the SFBA debate (save for the pricing numbers difference).
> It’s no longer the best place in the world to start a startup.
The place with most active investors with the largest investments? The place with the biggest pool of programmers and pms and designers? The place with the best legal system to foster entrepreneurship?
Where else in the world would you get all of this? (Not even including beaches, attractive people, weather, food, top hospitals and universities, diversity, optimism, etc)
And to the author. San Francisco != all of tech in California
> The gains from the existing tech industry increasingly accrue to a) passive investors, and b) lucky landlords.
Sure, but compare that to any other industries. Tech industry is still very very mericratic. (Low startup capital, barrier to entry) Besides, every company is a tech company now
> The state government is a levered bet on tech compensation.
Why would you not want to bet on the best industry going forward? The one that eats all the other industries?
I enjoy Silicon Valley obituaries. I've read them every time some bubble bursts, whether it was the video game bubble, the integrated circuit bubble, the dot-com bubble, or the social media bubble.
What the authors usually miss is that the things they call out as killing the Bay Area (home prices, job shifting, taxation, Etc.) have been true for at least the last 60 years. What they miss are the things that power the engine.
Those things are an at will work force, with legislative protection against non-competes, combined with wealth sharing/creation that is unlike any other place in the world.
There are more IPOs coming out this year, Lyft, Uber, and others. And already the real estate folks have said "prepare for the shock of higher prices." That is because there will likely be thousands of millionaires minted over the course of the year. And while that wealth will be distributed unevenly, some will be lucky, and others will not, once again there will be a refreshing of the 'who got rich with some big event' sorts of stories and people will "know" someone who got rich. I got to experience that when Sun went public, lots of people I knew as co-workers were now much much wealthier than I was, they were buying houses in Palo Alto and Saratoga and I thinking about private school for their kids. Sometimes, or or the other of a married pair dropped out of the workforce. And with that wealth people left the companies where they made their money and went to other companies to grow them. Some of them got to experience that IPO burst, two, three, and even four times.
You get groups of people who "self fund" their adventure/idea and work for free on some new topic. That is hard to do if you don't already have independently wealthy engineers to start with.
Think for a moment if your city was full of people in their 30's and 40's whose lifestyle and needs was fully funded by their existing wealth. Do they sit around and sip drinks on the porch? Not here they don't. They get together and start building stuff. Sometimes small things, sometimes big things. And when they do, there is no shortage of capital companies that are willing to augment their efforts in exchange for a piece of the pie. And some times that explodes again into another pile of wealth.
It is certainly a pretty unique place to hang out. And I expect that is part of why it is so hard to "replicate."
Something touched on with the piece, but not quite hammered nearly as much as it should have been: switching costs, which have dramatically changed in the past 10-15 years.
The initial round of California VC money came from hardware startups cashing out. Hardware is tied to the physical realm, and thus locality is important - if you need to buy leftover equipment or supplies, it's way easier to get them if you're in the neighborhood as your vendor.
The next round of software startups in the 90s through early 00's had a similar switching cost with VC funding. Though we obviously had telephones and email, we had not fully transitioned into the "remote work" mindset that allows teams to collaborate regardless of distance. It was challenging for VCs to work effectively with their founders, and for founders to work effectively with their teams - which forced teams to co-locate with founders, and founders to co-locate with VCs.
You don't need the world's best software engineers to launch a startup - you can launch something with sufficient complexity to start making money in Denver, or Austin, or Chicago, or anywhere else with a reasonable supply of engineers. And now, VCs are far more tolerant of remote founders given how easy it is to stay in communication. If all that is true, why make things more economically challenging than they need to be by trying to fight the economic headwinds of California?
Oh boy, here we go again, another article proclaiming that California is too expensive and you're better off starting your company elsewhere. California has been expensive for a very very long time, decades. Yet, every year, someone gets hopeful that this is it, this is some sign, tech is finally moving on from California. When I moved to California in 2007, startups in Austin were the next big thing. SXSW celebrated a huge number of Austin startups, and then once they grew to a larger size, they all migrated here to California and the scene seemed to evaporate overnight.
The problem these types of articles fail to grasp is that even with paying a tech worker over $200 to 500k a year, that is still an amazing return on investment. Not even considering just the FAANG companies, but all the other ones like LinkedIn and Square, Twitter and DropBox, they're raking in billions a year in revenue. They make so much raw cash, they have stock buybacks and investment arms of their companies that just invest in other things.
There are other tech cities, of course, Seattle being another hub. You don't have to pay as much for your employees and the cost of living is adjusted for that expectation. LA and NYC have a pretty decent cluster of workers as well. The problem is, you can find generalists, but once you start to need specialized engineers or roles, it gets exponentially harder and you end up creating remote offices in the Bay Area to capture that.
I'm not going to defend that it's not exhausting living here. It's hyper-competitive and the politics of "live and let live" create pockets of very seedy places in all the strange areas. Yet, some of the brightest people in the world live here doing some of the most amazing things in the world. It's super easy to find a meetup where, for example, the guest speaker invented Rust, for free, with pizza, on a random Tuesday! Other places around the world have to create these specialized conferences to make it worth their effort.
San Francisco is just...dystopian at this point. In-your-face poverty mingling with obscene wealth, human feces and used needles everywhere downtown/SoMa, decrepit 1 bedroom homes that sell for $1m, very few families/kids, and to make things worse stores that would be open til 10pm in any other city don't seem to stay open past 5-6 (at least in the Castro).
Edit: I thought it was weird for me as a single youngish male to "care" that there are kids and families in a city, but you're reminded when you go to basically any other city how much "realer" a city feels when you actually see families (moms, dads, kids, grandparents) walking around and enjoying each other's company and life in general.
I think its a good article, but I'm confused about the author's implication that the state government is consciously choosing to depend on income and capital gains tax revenues. California does depend on those taxes, but not by choice: Prop 13 made it basically impossible for property tax revenues to grow at the same rate as the economy.
I also agree with the other comments here that this author seems to think SF == Bay Area. Much of his comments about hippies and landlords conspiring make no sense in the rest of the bay, where it is actually relatively wealthy homeowners conspiring to prevent growth in order to ride the surge in home prices.
I've seen this article over and over through the years. I moved to Palo Alto in 1984 when all the houses were under water and people told me that I'd missed the boom. California has plenty of issues, but always muddles through them.
California's economy is more diversified and resilient than that of, say, Detroit. There's much more to the state than startups. Sure, eventually it will be superseded in some way or another, but I doubt it will happen in my lifetime.
I've had a few casual conversations about the collapse of California recently. In my opinion, zoning laws will be the death of San Francisco. The greed of the NIMBY's will eventually drive prices too high for anyone that didn't buy 20 years prior (i'm amazed it hasn't happened already). I've been entertaining the idea of a state putting extreme limits on zoning laws. I'm not an economic expert so i'm not sure what it would look like, but I can't help but compare to Tokyo with their ballooning population and stable cost of living.
California is fucked because normal people can’t afford to live here anymore. At least not in the Bay Area, LA, and San Diego.
In San Francisco a favorite pastime is to blame tech workers for “driving up rents” anyone who has taken economics knows prices don’t work that way. Prices go up when demand exceeds supply. We also are quite aware of WHY demand exceeds supply. 1) People keep coming here because we keep hiring, and 2) people who already live here block new housing construction. The objection we see in every community meeting is “we don’t want to change the character of our city”. I assure you, driving out your teachers, bus drivers, baristas and librarians is changing your city even worse. It leads to congestion, increased homelessness, loss of diversity. For every ten jobs we create we build two new houses. It’s not the people with new jobs that suffer.
Here’s the solution. A new state law saying if a city adds a job it also has to permit the construction of a unit of housing. Done.
I assure you if the City of Mountain View has to follow that rule, the muddy lot next to Google campus (currently zoned for hotel) would have a ten story apartment building in it next year. Why hasn’t it happened yet? Not allowed. Well who doesn’t allow it?
The city. Why won’t the city allow it? Residents don’t want new housing. Why don’t residents want new housing? A mistaken belief that blocking new housing will preserve their city. Blocking new housing will in fact destroy our communities.
We can get out of this mess, but we have to build our way out.
You'd think an article about the fate of California would mention Los Angeles, or agriculture, or anything other than the SF bay area and tech. Even the mention of the state government is a reference to the tech industry.
> However, the current crop of big companies will still be the big tech companies in 2030 and 2040.
What’s the reasoning here? Rewinding to 1999, Microsoft is the only (then) big tech company still doing interesting things. Apple was mostly irrelevant and on the brink of collapse, Google was an academic curiousoty, and Facebook wouldn’t exist for another half decade. A lot will change in 20 years. I suppose Yahoo, Oracle, and IBM are still kicking and probably will for a long while, but they are hardly forerunners at this point.
Seems this article is not about California, but the SF Bay Area. Greater Los Angeles housing is not nearly as over priced, nor is it as dependent on the tech sector.
We've had "peak San Francisco" three times since the 1980s. Late 1980s, when the heavy industry moved out. 2001, the dot-com crash. 2008, the real estate crash. Looks more cyclical than fundamental.
Arguably, the reason why the valley was the best place for startups is due to the density of the VC economy there and the wisdom of founders who have exited startups there. Once other factors have provided enough competing negative value the only thing that is left is empty consensus (trend chasers, vanity, popularity admirers), which is healthy for marketing but is horrid for innovation.
With those things in mind if you have no problem achieving early investment and a healthy base of users/clients there is no reason to be in the valley (or any high cost market).
This is interesting but he kind of jumps all over the place; it strikes me more as a brain dump of ideas and hypotheses.
There are a few areas where he’s playing pretty fast and loose with the facts, too. For example: NYC has way more homeless people than SF, but they aren’t as visible because under city law, the city is required to provide shelter to all of them. It has nothing to do with the weather, and in that sense NYC is way nicer to its homeless than SF.
[+] [-] freehunter|7 years ago|reply
"Californians will end up like the landed gentry in interwar England. Lovely houses, illustrious history, and no conceivable way to pay their bills."
Why do tech companies flock to California (LA/SF)? I often hear people credit the great technical universities. But that can't be, because most of the actual workers at these companies didn't go to Bay Area or even California universities [1]. If they're willing to move from their home to California for work, it's safe to assume they're willing to move from their home to almost anywhere else for work. It's not due to cheap housing or even available housing. It's not due to the great commute into work. It's not due to the low cost of living. The only argument I hear is that tech companies move to SF/LA because lots of tech workers are there, and lots of tech workers are there because lots of tech companies are there.
So if there's nothing holding technology to SF/LA, when does it become a competitive advantage to have your offices anywhere but California? At some point it will. And it will be long overdue.
[1] https://www.mercurynews.com/2018/01/17/h-1b-foreign-citizens...
[+] [-] borski|7 years ago|reply
The upshot is that now I volunteer my time often, and for free, to help others who are just starting out. I cannot predict who will be the next Google, but I enjoy helping smart founders, and I enjoy giving back in the same way I was given to.
A few relevant essays: http://www.paulgraham.com/siliconvalley.html http://www.paulgraham.com/ronco.html
[+] [-] jldugger|7 years ago|reply
1. California has laws surrounding non-compete, making it easier to poach from the Fairchild Semis, Hewlitt Packards, Intels, Sun Microsystems and Googles of the era.
2. It's easier to recruit out of Michigan than into it. California wisely keeps its snow in one place: Tahoe.
3. Diversity. As you point out, there's a ton of H1-B workers, and SF and LA have sizeable preexisting communities. It's just easier to be an immigrant or hyphenated-American in world class metro areas that can support a variety of ethnic and cultural clustering.
4. Public transit. Depressingly, the bay area still has better public transit than most other cities. Yes, the big companies still run coaches in the bay area, but that works in part because of density you won't see in cheaper, lower cost metros. And if you're recruiting internationally, the ability to commute to work without a drivers license or car kinda matters.
5. Access to money. There's a decent number of banks in SF's Financial district -- Wells Fargo and Charles Schwab are headquartered here. VISA is nearby in Foster City, and there's a number of VCs on Sand Hill Road you won't find in other cities.
[+] [-] tyre|7 years ago|reply
While that doesn’t seem like something that _has_ to be in California, it is already here and that’s not something you can just move.
As for why other cities have a hard time competing, it’s the same thing. If CA is perceived as “where innovation happens” then people will look for jobs here. They won’t even look at e.g. Kansas City or Charlotte or wherever, even if there are open roles there.
It doesn’t have to be this way and probably won’t be in ten or twenty years. Especially after this wave of IPOs, SF will likely be unlivable for most. If companies can continue to raise enough money to pay equivalently higher salaries, then the boom can continue a while longer. Otherwise, the numbers don’t make sense.
[+] [-] HillRat|7 years ago|reply
[+] [-] anyfoo|7 years ago|reply
Not sure. I moved to the Bay Area from Germany, and while the primary factor was of course the job that was offered to me, the nice weather and the really quite stunning landscape were a factor. I'm still pretty happy if I'm on a hilly street in SF and see the bay, the Golden Gate Bridge, all that jazz. And SF itself is still quite a pretty city, despite its problems.
[+] [-] TomVDB|7 years ago|reply
Not at all: for me personally, California was a bit of the final destination. It's the place where you have the best chance of being at the forefront of technology. And where you have the highest chance of finding your next job if the first one doesn't work out.
When I moved away from the East Coast to the Bay Area, it was already clear that it'd be hard finding another job in my field (chip design) if my current company would go under. That company has since gone under and over the past decade, a large part of our circle of friends there now lives here.
Talk about Silicon Alleys or Silicon this or that somewhere else is nothing new. I remember such articles in the nineties.
I do think things will slow down in general because of Moore's Law being close to the end. But that's going to be a problem for everyone, not just Silicon Valley.
[+] [-] roenxi|7 years ago|reply
If California's state government mismanages things so badly that the costs imposed by being in California exceed the network benefits things could change very quickly. Until such a day, it is likely that they will enjoy a significant advantage in producing tech stuff. Location benefits are far greater than the pundits realise, some things are nearly impossible in practice if you aren't located in a key hub for your industry.
[0] https://en.wikipedia.org/wiki/Economic_geography
[+] [-] jlrubin|7 years ago|reply
Sure take a job in MA or NYC as an engineer, but come back in 2 years when your employer is preventing you from working or building a company.
[+] [-] pascalxus|7 years ago|reply
Voters think they can actually stop growth by stopping housing development. It's not the housing that brings people to CA, it's the jobs, especially jobs for immigrants and jobs for people outside of CA (in the US).
[+] [-] adrr|7 years ago|reply
[+] [-] lotsofpulp|7 years ago|reply
[+] [-] simonh|7 years ago|reply
You just stated the reason why the tech companies are there. Feedback loops are a real thing that happens.
As a result of all the tech companies being there, the tech VCs are there, the recruitment agencies are there, etc, etc. That’s just how this works. To see the original factors you’d need to look at the history of the region, but beyond a certain point these things become self sustaining.
Sure there are forces in the other direction, and some individuals or companies might find them compelling, but specialisation works.
[+] [-] Swizec|7 years ago|reply
I for one find it easier to change my environment than to fight my environment.
[+] [-] joshuamorton|7 years ago|reply
2 flaws here:
1. The majority of those h1b workers are at like tcs Wipro and Infosys, not conventional sv companies.
2. Being close to technical universities is good if it gives you a recruiting edge, even if only some of your employees come from that school.
[+] [-] dalbasal|7 years ago|reply
It's not a straightforward question, and I don't think any answer is entirely satisfying. A couple of cents though.
1¢ - Industries like tech are a cultural phenomenon, like a music industry or art industry. You can't just decide that Warsaw will have Seattle's grunge rock scene. It just grew there as a cultural outgrowth. It can't be planted elsewhere with predictable results. The thoughts and little decisions made by people are influenced by their cultural context.
2¢ - For the best (in business terms) tech companies, currently, costs like salaries mean nothing.
Twitter and FB were Twitter and FB with 1% of their current visits and employees. The extremely profitable and businesses enabled them to hire tens of thousands of people and spend tens of billions per year. We're these people necessary to the ad part if the business that employs most of them?
I suspect that they aren't. IE, if it turned out FB could only make $40bn or $8bn pa (currently making $80bn) from their site, they would manage to produce the same fb with few compromises on a much reduced budget. This isn't BMW, where operating costs and economic output (the number of cars) are tightly related to eachother.
If google or FB want to increase profit margins, they can, easily, by a lot. They would if they needed to, but they don't. Capital markets like the idea that they are reinvesting for growth and capital markets don't have any better ideas for where to invest profits anyway.
With no incentive to cut costs, why move somewhere cheaper?
[+] [-] Nasrudith|7 years ago|reply
There are multiple reasond - security from layoffs or bad workplaces, job-hopping is the defacto way to raise salary, and it also keeps them having to compete for them some.
A middle of nowhere job sets off "it's a trap" alarm bells consciously or unconsciously as an isolating move.
That said there is a lot of range between "most expensive areas in California" and "cheap one company towns".
I suspect sprawling out to network edges would maximize benefits for costs similar to Palo Alto once being the cheap option.
[+] [-] mattnewport|7 years ago|reply
[+] [-] unknown|7 years ago|reply
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[+] [-] baby|7 years ago|reply
[+] [-] creato|7 years ago|reply
Having great technical universities doesn't mean most workers will come from there. Obviously a majority of employees do not come from these schools. But a plurality? I wouldn't be surprised.
[+] [-] sonnyblarney|7 years ago|reply
How it came to be is related to a variety of factors.
But it has incumbency in some things and will be impossible to compete with in some ways.
Better for regions to develop competencies in which they have some kind of advantage. Alberta makes some kind of specialized natural resources extraction tech. Makes sense!
[+] [-] unknown|7 years ago|reply
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[+] [-] KorematsuFred|7 years ago|reply
Indian and Chinese immigrants also play a big role. Stuck on backlog these are cheap employees who are desperate for employment because their H1b is tied to they having a job. These people will work for 60 hours a week for a salary of 20.
[+] [-] C1sc0cat|7 years ago|reply
[+] [-] tibyat|7 years ago|reply
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[+] [-] dmode|7 years ago|reply
Maybe this time the prediction will be true, but I am willing to take a large bet against it. And this is because several things, but the primary reason is that California continues to overindex it's policies towards people, while other competing states overindex on business friendliness. But in the knowledge economy, a thirivng talent market is far more relevant to a business than some tax breaks. If you can't execute and be profitable, what's the point of a tax break. California optimizes for people through various mechanisms - non competes, inclusivity, diversity, environment, labor protection, safety net etc. If a place is great for people, it is great for business.
[+] [-] cantrevealname|7 years ago|reply
It reminds me of a similarly long discussion here on HN about why Americans were generally thin in the 1950s but much fatter today. Again, everyone was pretty sure of their reason, the leading theories being: fast food, food being cheaper, rise of sedentary jobs, less physical activity due to more cars & labor saving devices, wives now working outside and not cooking at home, big reduction in smoking (because it keeps you thin), more sugar in foods, more carbs in our diet, etc.
All of the theories above sound reasonable. The problem is that there is almost no way to do controlled experiments to find the true answer. And the true answer could be quite complex, like it was initially 38% factor A, 22% factor B, and the C,D, & E making up the rest, but over time it's become 5% factor A, 11% factor B, with factor D now dominating at 58%.
I'm resigned to the conclusion that we're not going to know the answer. It's a complex interaction of millions of individual decisions and interrelated changes over a period of decades in a way that's not reproducible.
[+] [-] scottlocklin|7 years ago|reply
Nobody wonders at Wall Street being a center of finance after some 18th century traders met under a buttonwood tree, nobody wonders at Hollywood continuing to be a center of film and TV production, and nobody should wonder at Bay Area being a center of software development.
[+] [-] thedaveoflife|7 years ago|reply
Somewhat incidentally this is the major theme of Tolstoy's masterpiece War and Peace
[+] [-] Felz|7 years ago|reply
Remember, most things are hard to explain until you know the truth. That doesn't mean the truth is super complicated.
[1] https://slatestarcodex.com/2015/02/14/how-likely-are-multifa...
[+] [-] nostromo|7 years ago|reply
https://en.m.wikipedia.org/wiki/List_of_U.S._states_and_terr...
(See the column of the Census’ supplemental poverty measure.)
[+] [-] ajmurmann|7 years ago|reply
[+] [-] bhl|7 years ago|reply
[+] [-] rsync|7 years ago|reply
Or, from a slightly different standpoint, the rest of the country is California, just 20 years behind schedule.
I have lived in many different places all over the United States, including twice in California, where I have settled with my family, and it's very easy to fall into a "crazy california" narrative - especially when comparing with "sensible" places like Minnesota. But it's not true. Right this very moment in Minneapolis there is a heated, polarized debate about housing affordability and homeless services and zoning that is indistinguishable from the SFBA debate (save for the pricing numbers difference).
[+] [-] witcherchaos|7 years ago|reply
> It’s no longer the best place in the world to start a startup.
The place with most active investors with the largest investments? The place with the biggest pool of programmers and pms and designers? The place with the best legal system to foster entrepreneurship?
Where else in the world would you get all of this? (Not even including beaches, attractive people, weather, food, top hospitals and universities, diversity, optimism, etc)
And to the author. San Francisco != all of tech in California
> The gains from the existing tech industry increasingly accrue to a) passive investors, and b) lucky landlords.
Sure, but compare that to any other industries. Tech industry is still very very mericratic. (Low startup capital, barrier to entry) Besides, every company is a tech company now
> The state government is a levered bet on tech compensation.
Why would you not want to bet on the best industry going forward? The one that eats all the other industries?
[+] [-] ChuckMcM|7 years ago|reply
What the authors usually miss is that the things they call out as killing the Bay Area (home prices, job shifting, taxation, Etc.) have been true for at least the last 60 years. What they miss are the things that power the engine.
Those things are an at will work force, with legislative protection against non-competes, combined with wealth sharing/creation that is unlike any other place in the world.
There are more IPOs coming out this year, Lyft, Uber, and others. And already the real estate folks have said "prepare for the shock of higher prices." That is because there will likely be thousands of millionaires minted over the course of the year. And while that wealth will be distributed unevenly, some will be lucky, and others will not, once again there will be a refreshing of the 'who got rich with some big event' sorts of stories and people will "know" someone who got rich. I got to experience that when Sun went public, lots of people I knew as co-workers were now much much wealthier than I was, they were buying houses in Palo Alto and Saratoga and I thinking about private school for their kids. Sometimes, or or the other of a married pair dropped out of the workforce. And with that wealth people left the companies where they made their money and went to other companies to grow them. Some of them got to experience that IPO burst, two, three, and even four times.
You get groups of people who "self fund" their adventure/idea and work for free on some new topic. That is hard to do if you don't already have independently wealthy engineers to start with.
Think for a moment if your city was full of people in their 30's and 40's whose lifestyle and needs was fully funded by their existing wealth. Do they sit around and sip drinks on the porch? Not here they don't. They get together and start building stuff. Sometimes small things, sometimes big things. And when they do, there is no shortage of capital companies that are willing to augment their efforts in exchange for a piece of the pie. And some times that explodes again into another pile of wealth.
It is certainly a pretty unique place to hang out. And I expect that is part of why it is so hard to "replicate."
[+] [-] josephmosby|7 years ago|reply
The initial round of California VC money came from hardware startups cashing out. Hardware is tied to the physical realm, and thus locality is important - if you need to buy leftover equipment or supplies, it's way easier to get them if you're in the neighborhood as your vendor.
The next round of software startups in the 90s through early 00's had a similar switching cost with VC funding. Though we obviously had telephones and email, we had not fully transitioned into the "remote work" mindset that allows teams to collaborate regardless of distance. It was challenging for VCs to work effectively with their founders, and for founders to work effectively with their teams - which forced teams to co-locate with founders, and founders to co-locate with VCs.
You don't need the world's best software engineers to launch a startup - you can launch something with sufficient complexity to start making money in Denver, or Austin, or Chicago, or anywhere else with a reasonable supply of engineers. And now, VCs are far more tolerant of remote founders given how easy it is to stay in communication. If all that is true, why make things more economically challenging than they need to be by trying to fight the economic headwinds of California?
[+] [-] jarjoura|7 years ago|reply
The problem these types of articles fail to grasp is that even with paying a tech worker over $200 to 500k a year, that is still an amazing return on investment. Not even considering just the FAANG companies, but all the other ones like LinkedIn and Square, Twitter and DropBox, they're raking in billions a year in revenue. They make so much raw cash, they have stock buybacks and investment arms of their companies that just invest in other things.
There are other tech cities, of course, Seattle being another hub. You don't have to pay as much for your employees and the cost of living is adjusted for that expectation. LA and NYC have a pretty decent cluster of workers as well. The problem is, you can find generalists, but once you start to need specialized engineers or roles, it gets exponentially harder and you end up creating remote offices in the Bay Area to capture that.
I'm not going to defend that it's not exhausting living here. It's hyper-competitive and the politics of "live and let live" create pockets of very seedy places in all the strange areas. Yet, some of the brightest people in the world live here doing some of the most amazing things in the world. It's super easy to find a meetup where, for example, the guest speaker invented Rust, for free, with pizza, on a random Tuesday! Other places around the world have to create these specialized conferences to make it worth their effort.
[+] [-] temp1928384|7 years ago|reply
Edit: I thought it was weird for me as a single youngish male to "care" that there are kids and families in a city, but you're reminded when you go to basically any other city how much "realer" a city feels when you actually see families (moms, dads, kids, grandparents) walking around and enjoying each other's company and life in general.
[+] [-] Shebanator|7 years ago|reply
I also agree with the other comments here that this author seems to think SF == Bay Area. Much of his comments about hippies and landlords conspiring make no sense in the rest of the bay, where it is actually relatively wealthy homeowners conspiring to prevent growth in order to ride the surge in home prices.
[+] [-] gumby|7 years ago|reply
California's economy is more diversified and resilient than that of, say, Detroit. There's much more to the state than startups. Sure, eventually it will be superseded in some way or another, but I doubt it will happen in my lifetime.
[+] [-] ngngngng|7 years ago|reply
[+] [-] true_tuna|7 years ago|reply
Here’s the solution. A new state law saying if a city adds a job it also has to permit the construction of a unit of housing. Done.
I assure you if the City of Mountain View has to follow that rule, the muddy lot next to Google campus (currently zoned for hotel) would have a ten story apartment building in it next year. Why hasn’t it happened yet? Not allowed. Well who doesn’t allow it? The city. Why won’t the city allow it? Residents don’t want new housing. Why don’t residents want new housing? A mistaken belief that blocking new housing will preserve their city. Blocking new housing will in fact destroy our communities. We can get out of this mess, but we have to build our way out.
[+] [-] nitwit005|7 years ago|reply
[+] [-] electricslpnsld|7 years ago|reply
What’s the reasoning here? Rewinding to 1999, Microsoft is the only (then) big tech company still doing interesting things. Apple was mostly irrelevant and on the brink of collapse, Google was an academic curiousoty, and Facebook wouldn’t exist for another half decade. A lot will change in 20 years. I suppose Yahoo, Oracle, and IBM are still kicking and probably will for a long while, but they are hardly forerunners at this point.
[+] [-] dvduval|7 years ago|reply
[+] [-] Animats|7 years ago|reply
[+] [-] austincheney|7 years ago|reply
With those things in mind if you have no problem achieving early investment and a healthy base of users/clients there is no reason to be in the valley (or any high cost market).
[+] [-] rafaelc|7 years ago|reply
There are a few areas where he’s playing pretty fast and loose with the facts, too. For example: NYC has way more homeless people than SF, but they aren’t as visible because under city law, the city is required to provide shelter to all of them. It has nothing to do with the weather, and in that sense NYC is way nicer to its homeless than SF.